The Cost of Buying Your First Home

Buying your first home is a very exciting time. However, we all know that it’s also going to be an expensive time. The team at Healthy Investment have set out what costs are involved to help you work out how much you need to save.

We recommend that you save up enough to cover all of the major upfront costs, which include:-

House Deposit

Saving for a house deposit takes time and the key is to save as much as you can as soon as you can. You need to save a minimum of 5% of the property value and even then your choice of lenders will be limited. It is therefore sensible to save at least a 10% deposit where you will have more choice of the latest deals on the market. However, according to the Halifax First Time Buyers Review (January 2018), in the last 6 months of 2017, first-time house deposits varied between 13% and 27%. According to a BBC News Article from January 2018 it was reported, following a survey by the Nationwide, that a typical first-time buyer has to save for an average of 8 years for a house deposit in the UK.

In that case, if you are prepared to take some risk and know that it is going to take some time, a great way to start saving for your first house deposit is to invest in a stocks and shares ISA. Due to the tax advantages of investing in an ISA, the government limits the amount you can invest in each year. This annual limit increases every year in line with the Consumer Prices Index.

Stocks and shares ISAs are riskier than investing in a cash ISA but over the medium to long term, you have the potential for a better return. You can invest up to the current annual limit of £20,000 in a combination of ISAs – so why not think about investing some of your savings in a stocks and shares ISA and some in a cash ISA – or investing in a stocks and shares ISA when you start saving and then in the later years, transfer it into a cash ISA.

The Healthy Investment stocks and shares ISA is an example of a lower risk stocks and shares ISA which might be appropriate for you as you set off saving for your new home.

If you are saving to buy your first home you should also consider investing in a Lifetime ISA (LISA). This is a new type of ISA which the government has launched and where they give you money towards your house deposit. There are not many providers of LISAs and they may not be available forever, but they could be a very valuable helping hand towards your house deposit.

For further information on Lifetime ISAs, please visit The Money Advice Service – Guide to Lifetime ISAs.

Mortgage

A mortgage is a loan from a bank or building society that allows you to buy a property. You then pay back the amount you have borrowed plus interest over a period of around 25 years, although you can take the mortgage out over longer or shorter terms.

The mortgage is secured against your property until you have paid it off in full. This means the lender could repossess your home if you fail to repay it.

You can obtain a mortgage either on your own or jointly with more people.

Alternatively, you can use a mortgage broker who may charge a fee, however, he or she will help you find the best rate and arrange the mortgage on your behalf. Very often you can get a better deal by using a mortgage broker. When you apply for a mortgage, lenders will look at your incomings, outgoings, and any debts you may have before deciding on how much to lend you.

We recommend that you save up as big a deposit as you can, ensure your credit score is good and attempt to reduce any outstanding debts.

Mortgage Fees

There are a number of fees and charges you might need to pay if you’re taking out a mortgage. These include mortgage broker fees, valuation fees, arrangement fees and more. The Money Advice Service has a useful Guide to Mortgage Fees and Costs.

Stamp Duty

Stamp duty is a tax that you have to pay when buying property in England or Northern Ireland. However, stamp duty has now been abolished for most first time buyers if the purchase price is below £300,000.

For further information on Stamp Duty, go to Money Advice Service – Stamp Duty.

Surveyor Fees

Money spent on a decent survey can save you a fortune in the long run and help you avoid expensive costs once you have moved in. It can also help you renegotiate the price of your house if some minor improvements or repairs are needed. Your mortgage lender will also request a mortgage valuation survey to ensure that the property you are buying is worth the price you are paying for it. For further information on homebuyer surveys and costs, please go to the Money Advice Service – Surveyor Fees.

Legal Fees

You will need to instruct a Solicitor to process the legal work involved when buying and selling your home. They will also carry out all the local searches on your behalf which usually cost in the region of £250-£300 to check with the local authority for any local planning applications that might affect the future value of your house or other problems – for example, disused mining works under your new home. This is all part of the normal home buying process.

For the Solicitor’s fees, you normally pay around £850-£1,500, inclusive of VAT at 20%. It is worthwhile shopping around or asking a friend or family member to recommend a Solicitor they have used. For further information on conveyancing fees and how to find the right solicitor, please visit Money Advice Service – Conveyancing.

Estate Agent Fees

For first time buyers, this is only paid by the seller, not the buyer. The cost is negotiated when the seller puts the property on the market. Different rules apply if you are buying your house at an auction where you would have to pay fees and charges. If you are thinking of buying at an auction you should seek lots of professional advice beforehand.

Removal Fees

Removal costs usually start from £100 for small local moves, up to £1,000 for a full family’s belongings, especially if they are moving a long distance.

As a first time buyer, to save on removal costs, it is worth considering whether you can call on family and friends to help pile up your belongings into the back of their cars – alternatively, you could hire a van for the day and get family and friends to help out.

At Healthy Investment, we pride ourselves on our ethical values and ethical products. The Society will never invest your money directly in alcohol, arms and tobacco industries, nor gambling and pornography providers.

For further information about how we invest Members’ money and the ethical investment products we provide, please visit our website at www.healthyinvestment.co.uk or contact the friendly team at Healthy Investment on 0161 762 5790; or email enquiries@healthyinvestment.co.uk.

Alternatively, you can find out about our ethical products by clicking on the links below:-

ISAs
Junior ISAs
Investment Bond
Tax Exempt Savings Plans